Personal Finance Tips to Boost Your Budgeting: How to Cut Personal Expenses
Published on: October 31, 2023
Budgeting can prove difficult for everyone from working adults to college students. Learning how to budget and set financial goals while you are in college or while you are a young adult can prove to be beneficial. You have big plans for the future and are well aware that financial stability can move you closer to those goals. Saving can be a struggle, however, especially as inflation and the cost of living continue to increase. Increasing your income can make a dramatic difference, but it might not be enough to overcome chronic spending struggles.
To that end, we’ve compiled a guide to all thing’s money management: why it matters and how it can change your life. Keep reading to learn how to cut personal expenses and create a budget that helps you achieve your most ambitious financial goals.
Why Personal Budgeting Can Help You Manage Finances
Your finances represent the ultimate juggling act. You bring in money through wages, tips, commissions or investments — and, of course, you find endless ways to promptly spend those funds. Some costs are essential, of course: rent, mortgage, car payments, insurance and so on. Many, however, are easily adaptable. This represents both a huge risk and a huge opportunity. Yes, there’s always a temptation to spend more than is responsible, but responsible habits can dramatically accelerate your pace of saving.
It all begins with a plan. You rely on goal setting to help you make progress in every other area of life — why should money-saving be any different? If you go about this haphazardly, you’ll struggle to stay on track, even when you have positive intentions. Personal budgeting, however, forms a simple and easy-to-follow blueprint that will inform both major purchases and day-to-day spending. You’ll be amazed by how much more you save when you put a simple spending plan into action.
How to Start Personal Budgeting
Most college students recognize the value of personal budgeting, even if they struggle to live out their financial ideals. The College Ave Student Loans survey from Barnes & Noble College Insights reveals that half of today’s college students maintain a personal budget. Those who don’t, however, often find the mere idea overwhelming.
Often, simply starting is the greatest hurdle. Remember: perfection is not the goal. The most crucial step is to simply gain insight into how you spend — and how your prospects could change if you made small, but targeted changes. Start small by tracking your spending, finding creative ways to cut back and, in general, adopting an everyday mindset of saving overspending.
Ways to Save at Home
When you think of top budgeting strategies, you probably picture all-out shopping extravaganzas — and the obvious need to cut back on these. Often, however, overspending is a lot more insidious. This will become most evident as you analyze your household budget and reveal how much you spend on the everyday concerns that are dull, but necessary. Examples include:
Keep Track of Electricity and Water Usage
Some of the easiest, most painless ways to cut back involve your everyday electricity and water consumption. Chances are, you use far more than necessary — but you won’t know unless you actually take a look at your bills. This is a great chance not only to dramatically cut your spending, but also, to do your part for the environment.
To begin, gather your most recent electricity and water bills. These should include details about how much you’ve used in the past month and may also provide graphs indicating your trends over time. Look for sudden increases, which could indicate leaks or other issues. Take some time to get familiar with how, exactly, these utilities are charged: common examples include flat fees, increasing block rates and seasonal rates.
Simply tracking will make you more cognizant of how much you’re using. This will shape your behavior moving forward. Beyond fixing leaks and using WaterSense or EnergyStar appliances, you can assess the specific ways in which you tend to waste water or electricity; running the air conditioner when it’s not needed, for example, or taking long showers. Start small by reversing one or two habits — and pay attention to whether they have any impact on your water or electricity bill.
Eat Out Less
Eating out is one of the biggest sources of discretionary spending and should be the easiest to cut back on. Between busy schedules and the desire to socialize, however, this may prove more difficult than you anticipate.
You don’t have to give up restaurants altogether — but when you do eat out, it will ideally be reserved for special occasions. Aim for just once per week and meal prep the rest. Shift some of your socializing to other activities, such as taking a casual stroll or getting together for a movie night in your home.
Don’t Throw Away Leftovers
Leftovers have an amazing way of saving both time and money. When meal planning, choose dishes that are conducive to reheating — or that have main elements that can be used in multiple recipes. Leftover turkey, for example, works well in soups and sandwiches, while leftover noodles or rice can be dressed up with new spices or other ingredients. Don’t forget leftovers from restaurants; on the rare occasions you splurge by eating out, save half of your oversized meal and box it up to enjoy later.
Reuse and Repurpose Items
Single-use items add up over time and can keep you spending continuously when a one-time purchase would have sufficed. They are also incredibly wasteful. Develop a mindset of reusing over recycling and you may find that a variety of items can be repurposed to prevent additional purchases.
This tactic has recently become widespread with the proliferation of Buy Nothing groups. Even if you are personally unable to reuse items, you may find that somebody else is more than willing to do so. Similarly, you can reuse or repurpose things that other people no longer need.
Everyday Opportunities to Help Manage Expenses
While major purchases may receive the most attention, it’s actually the day-to-day, seemingly trivial spending habits that make the biggest difference over time. It may seem cliche, but those small indulgences (like coffee or fast food, for example) really do add up.
If you’re truly intent on cutting personal expenses, you’ll want to know how much, exactly, you’re spending — not to mention when, where and why. Follow these simple steps to start tracking and managing your daily expenses:
Keep Track of Spending Habits
How much thought do you put into everyday purchases? If presented with a list of everything you’ve spent money on, you might be shocked by the total. From here on out, however, you should have a solid understanding of what you spend on a daily, weekly or monthly basis — or where that money is allocated.
Tracking is a critical first step to getting your finances under control. For many, it’s also the most annoying practice to implement. Credit card statements or even details from Venmo and PayPal can help. Better yet? Apps such as Mint, which reveal how much you’re spending, where that money is allocated and where you can cut back without feeling as if you’re sacrificing.
Set Weekly and Monthly Budgets
Once you have a basic feel for how much you earn — and how much is typically allotted towards specific spending categories — you can set a budget that reallocates you’re spending or allows for modest reductions in specific categories. This allows you to set personal goals for how much you save or spend in any given week or month. It should be tied to your previously tracked monthly expenses, with some allowance for unexpected expenses or emergencies.
At minimum, your new budget should aim to spend less than you earn. A better rule of thumb, however, involves the popular 50/30/20 strategy: half of your income dedicated to needs (rent, food, etc.), 30 percent is for wants (entertainment or hobbies) and 20 percent for savings.
Consider All Aspects Before Purchase
If you have a major purchase in mind, do your research to ensure that it is within your means and, once obtained, will stand the test of time. Also, consider how it will fit into your current life — and whether there are any alternate options for savings on this purchase or avoiding it altogether. A traditional list of pros and cons may be your best bet for making a truly informed decision.
Buy Used or Less-Expensive Products
Shiny new products are fun to purchase but not so great for your bank account. Often, items of similar quality are available lightly used or at steep discounts. Thrift stores and Facebook Marketplace are wonderful options worth exploring.
Again, this is a fantastic opportunity to make the most of Buy Nothing groups. You may be surprised to find that the exact thing you want is gathering dust in somebody else’s closet, and therefore, ready to be passed on to your home.
More In-Depth Ways to Save
From high-level apps to financial advisors, a variety of resources can provide powerful insight as you seek to adopt the most impactful strategies for spending and saving. Add these essential measures to the mix to ensure you stay on track:
Download Personal Finance Trackers and Apps
We’ve already highlighted Mint as an excellent option for tracking your spending, but it is only one of several solutions worth considering. Other favorites include:
- Honeydue
- YNAB
- EveryDollar
- PocketGuard
Schedule Regular Appointments With a Financial Advisor
The strategies we’ve identified above can help you make small spending reductions that add up over time — but they’ll mean little if your big-picture strategy includes numerous financial missteps. There is no substitute for professional guidance, especially as you determine what to do with the money you’ve worked so hard to save.
A financial advisor is a must. This person can clue you in on critical strategies while helping you weigh the risks and potential rewards for various investment opportunities. Meet regularly with your financial advisor to discuss your current status and that of the market in general.
Monitor Your Bank Account Activity
When did you last check your bank account? If you aren’t taking a close look on a regular (even daily) basis, you may find it easier to spend excessively — and you may also neglect to move your money where it earns you the most interest. This daily practice is also important if you have limited funds in your account, as you otherwise risk overdrawing.
Pay Off Credit Cards on a Regular Basis
Paying the minimum on your credit card may keep you out of trouble in the short term, but over time, it will lead to exorbitant interest payments. If you have the means to completely pay off your credit cards, make a point of doing so. If not, put as much money as possible towards your higher-interest cards. In addition to limiting interest, this will boost your credit score by promoting lower credit utilization.
Put Your Financial Knowledge Into Action
If you’re fascinated by personal finance, consider seeking a relevant degree from Park University. We offer a variety of programs that encourage you to improve your financial acumen and empower you to help others.
An excellent option? Our Bachelor of Science in Business Administration in Personal Finance, you could also benefit from a Finance Concentration as you seek your Master of Business Administration or Master of Healthcare Administration. Similarly, our Accounting degrees and certificates could prepare you for a rewarding career.
Reach out today to learn more about our various finance and accounting-oriented degree programs — and the role they could play in elevating both your personal life and your career.